Patenting University Research Has Been A Dismal Failure, Enabling Patent Trolling. It's Time To Stop

from the fix-this dept

For many years we've been incredibly critical of the famous Bayh-Dole Act, which was passed in 1980 with the idea that it would encourage greater innovation by pushing universities to patent the research they were doing. The theory -- based on a rather ignorant view of innovation and research -- was that patents would create a market, which, in turn, would enable easier knowledge transfer from academia to industry, leading to a research boom. The actual results have been a near total disaster. What's actually happened are two very bad things. First, it's seriously harmed university research, by guaranteeing much less information sharing between researchers. And, it turns out, that information sharing is a big part of how innovation and big scientific breakthroughs occur. Not surprisingly (if you understand basic economics), when you try to lock up each idea with a patent, researchers (and, more importantly, their administrator bosses), suddenly don't want to share any more. The end result? Lots of important research stifled. What a shame.

The second massive problem in the wake of the Bayh-Dole Act was that every university stupidly thought that it would help make them rich. They bought into the myth of patents and this idea of "tech transfer," and pretty much every research university set up a "tech transfer" office, whose main job was to try to "license" those patents for as much money as possible. University administrators started licking their chops at this potential profit center. But, over the past couple decades, reality has set in. As we've noted for years, ideas are a very, very small piece of the puzzle for innovation. It's the execution that matters. But the folks working in tech transfer offices never understood that and have tried to put ridiculously high prices on their patents, in an attempt to justify their own existence. End result? The exact opposite of the stated goal of the Bayh-Dole Act: less research got transfered into industry, because various tech transfer offices priced it out of the market.

We've pointed out in the past that this expected "profit center" has been a disaster for nearly every university that tried it. With only a handful of exceptions (Stanford, MIT, etc.) tech transfer offices have cost more than they've ever made... while serving to lock up important research, limit collaboration and generally cost the university money that could have gone elsewhere. Oh, and then the trolls came in. We've discussed plenty of times in the past how Intellectual Ventures is the world's largest patent troll, but what few people pay attention to is how it got its patents. That's the nasty secret. The crew at IV saw all the problems with tech transfer offices and saw an opportunity: IV went around from university to university and offered to buy patents in bulk. Desperate tech transfer offices, needing to show some revenue coming in gobbled up the offers, and voila, a giant massive patent troll with tens of thousands of patents was born -- often based on research that was funded by taxpayer dollars.

This appears to be a massive transfer of wealth from taxpayers to billionaire Nathan Myhrvold, thanks to a bad law that has harmed research, damaged the advance of science and knowledge, harmed university finances and decreased actual innovation. Remember, IV has never produced a single product and brought it to market.

Using tech transfer office expenses information, Valdivia estimates that 130 universities did not generate enough licensing income in 2012 to cover the wages of their technology transfer staff and the legal costs for the patents they file. What is more, with 84% universities operating technology transfer in the red, 2012 was a good year because over the last 20 years, on average, 87% did not break even.

In fact, the report notes that just 8 universities made up 50% of the licensing revenue. Basically, you've got a huge number of universities that are a giant cost center whose only job is to hold up innovation.

The report has some suggestions as to how this should change, noting that universities, rather than focusing on patents, should instead focus on helping spin out actual startups. On top of that, Congress should change the law to allow for, at the very least, an exemption for non-profit research or experimentation. Those aren't bad recommendations, but it seems like Congress could and should go much, much further.

Either way, it should be recognized what a complete disaster Bayh-Dole has been for basic research, and how it, indirectly, helped create a massive patent troll. Hopefully Congress will finally wake up to its mistake and fix this.

Some universities get it

Forward thinking universities are focusing on startups and spinouts as mentioned by Mike. There are a lot of resources heading this direction especially in Europe. The University of Edinburgh leads the way in the UK http://www.spinoutsuk.co.uk/listings/university-listings/Default.aspxfor startups and spinouts. The university has many programmes dedicated to helping students and staff start firms, such as its Launch.ed programme http://www.launch.ed.ac.uk/ and in-school commercialization and business development teams.

Really forward looking universities are finding creative ways to solve the capital gap as well. For instance Old College Capital at the University of Edinburgh http://www.oldcollegecapital.com/ helps protect the IP position of the university's spinouts through the funding rounds in a new venture's lifecycle. There are approximately 60 university venture funds globally, and this number continues to rise, as does the 150 student venture capital funds that are educational in mission.

Unfortunately a lot of universities remain stuck in the old paradigm. This has been my experience of late in advising a few of them. Interestingly, in some regards researchers themselves are pushing for using the resources of the tech transfer office to patent research, for there is status amongst their peers in compiling patents, even though they many not result in commercialisable products. There is also an institutional reluctance and lack of structure and process for taking equity shares in new firm creations. Incubation programmes help with this. Finally, many universities have become ownership-drive and are very reluctant to give up any of their piece of a very small pie, stifling startups at the doorsteps. There are a variety of reasons for this, not in the least envy or greed in my observations on the darker side; on the lighter side, do-gooders who believe they are doing the best thing for the taxpayer (when they are not).

Another big problem at most universities is the lack of space to house new firms and startups that are created. Again, look for innovation in incubation to help solve this issue. One solution is to just close down tech transfer offices and move all of these resources into space and staff for knowledge firm start-up incubation.

A more efficient means of knowledge transfer and exploitation of the economic benefit is due the taxpayers. Mike is certainly right about this. What a shame that one of the main benefactors from innovation policy ended up being patent trolls (that don't innovate themselves).

It is useful to reflect the benefits derived by taxpayers each April 15th when persons and companies have successfully taken an invention from conception to manufacture to sale. To suggest that taxpayers are being taken advantage of is most often not the case.

Since I am posting as an AC, I strongly agree that the manner by which so many institutions have gone about trying to monetize research borders on complete inanity. Internal incubators are, of course, one possible approach...but there are many others as well that are limited only by the collective imagination of the participants.

I also agree that the vast majority of university tech transfer offices have great difficulty seeing beyond the end of their noses, apparently thinking that patenting the dickens out of research will translate into "found money" known as licensing revenue. Why is this so. Speaking as one who has helped craft many business arrangements that ultimately achieved success in the market, I lay much of the blame at the feet of lawyers who seem to believe that they control the process because various legal rights (trade secrets, patents, trademarks, copyrights) happen to be involved. Time and time again I have had to beat it out of their heads that these are business arrangements, not legal arrangements. Business persons must control the process if any specific arrangement is to have any real possibility of success. Lawyers are often an important part of the "team", but then again so are financial gurus, business development experts, program managers, etc., etc. Running a tech transfer program, for those who understand how to do so, is no more and no less than running a small company having access to a plurality of skillsets.

While I am not so down on B-D as I understand the specifics of why it was created in the first instance, I do agree that it is not totally virtuous, but do not agree that it is without any redeeming features. I refrain from outlining some of the more notable features only because experience informs me not to tip my hand in the event a contested action arises in the future.

Universites are not commercial industry

" The theory -- based on a rather ignorant view of innovation and research -- was that patents would create a market,"

looks like exactly what happened.

"The second massive problem in the wake of the Bayh-Dole Act was that every university stupidly thought that it would help make them rich."

"IV went around from university to university and offered to buy patents in bulk."

So the universities DID SELL their patents, and made "billions of dollars", (according to your words).

"This appears to be a massive transfer of wealth from taxpayers to billionaire Nathan Myhrvold, "

That's interesting if IV pays universities money for these patents, where is the mechanism for billions of dollars to go to myhrvold's account ?

It would appear that IV is paying universities money, meeting their requirement to want to sell patents.

Something is for sale, and there is a buyer willing to pay the sale price for that item, what is the issue with the sale taking place?

not that I believe at all the universities need to become fully commercial, that is not what universities are for, and it does not accommodate fundamental research that has no direct commercial value (like CERN).

Universities are education and research, not commercial companies. Although there is a clear and close connection to industry and academia, with join research, scholarships and so on.

Re: Universites are not commercial industry

looks like exactly what happened.

Holy misleading clipping, Batman! I mean, a normal person would read the whole sentence and recognize that it was the end of the sentence that was important, concerning what the market would actually do. And it DID NOT do that.

So the universities DID SELL their patents, and made "billions of dollars", (according to your words).

Um. Where did I say that? IV did not spend billions of dollars on patents. It bought trash at cut rate prices from desperate tech transfer offices. The universities lost money on the deal, but allowed IV to then turn around and use those worthless patents in bulk to shake down billions from companies, without doing a damn thing for actual innovation.

That's interesting if IV pays universities money for these patents, where is the mechanism for billions of dollars to go to myhrvold's account ?

As explained above and in the article: university gets patents, IV buys patents for pennies, but then bundles them all together and gets billions from companies to avoid getting sued over bogus claims.

Something is for sale, and there is a buyer willing to pay the sale price for that item, what is the issue with the sale taking place?

Are you being willfully obtuse? The article explains it very clearly.

Universities are education and research, not commercial companies.

First off, even if this claim was true (and it's not), part of the very point of this article (did you even read it?!?) is that this is HARMING EDUCATION AND RESEARCH. Keep up.

Second, many universities recognize that a big part of what they do is about having close connections with actual industry, and are working on applied research that is actual useful in the real world. I didn't explain that because I assumed anyone not willfully misrepresenting the situation already knew that.

There's a new term for that now you know:

Collaboration

I feel a large part of ineffective TTOs is down to the size of the offering. More specifically, a small, mostly unheard of university with insufficient resources is under-equipped to perform effective tech transfer.

What a TTO needs is critical mass. The reason that MIT/Stanford etc do so well is that they have the high calibre of students and faculty combined with that big brand in the form of the parent's university. It's a similar story over in the UK with Cambridge/Oxford/Imperial College London etc.

To counteract this, TTOs can come together. In the UK, you have a coalition of five top universities in SETsquared, another group behind commercialisation firm Fusion IP, and you are seeing Imperial Innovations collaborate with not only ICL, but Cambridge, Ox, and UCL. This provides critical mass which the universities separately (II excluded) would not be able to achieve by themselves.

Again, this pattern has been repeated in France on a national scale with the establishment of the SATT system, which has seen the amount of TTOs operating in France reduced to 13 regional TTOs. While the SATT system is still new, obvious benefits such as better training, less competition, and bigger size are apparent.

Essentially, what you need is for TTOs to get IP out the door in the form of licensing or spin-outs in volume, and into a local economy that both needs the technology and has the investment community to support it (a little more help from the universities themselves would not go amiss). It's not going to happen everywhere, and certainly won't happen if your TTO is two guys in a shed trying to flog unwanted IP to an underfunded desert in the middle of the US.

Re: Collaboration

Building a business from an embryonic idea is a science all unto itself, but in order to do so using a TT model experience informs me that several "items" in relatively close proximity to each other are needed for most such ideas to have even a fighting chance from idea to public offering. Of course, the idea guy or girl (sometimes a team, but more often than not one or two). Since we are talking about TT in relation to universities, a longstanding reputation by the university in a scientific/engineering discipline is almost a must. The willingness and ability to engage a company (start-up, established, etc.) must be established so that potential market applications can begin to be talked about (it is indeed a rare professor that can divorce himself from academia and take a critical look at possible market applications). Access to capital. Access to capital. Access to capital. And then, finally, people in all of these groups who bring the skills necessary to take the ideal all the way through from idea to product/service.

Likelihood of eventual success. A long shot, even at institutions having an extensive record of success. But, when you succeed it is satisfying indeed.

One final note. Most successful business I have helped in this arena provide to an institution only modest, if any, licensing fees. Much more common are contracts for future research services, possible equity in a start-up, etc. Thus, I and my colleagues have never measured financial success by the quantum of licensing fees flowing into institutional coffers.

Just a few observations from someone who has been there and repeatedly done that.

more dissembling by Masnick

All this talk about trolls is just spin control by large infringers and their paid puppets to cover up their theft.

The patent system now teeters on the brink of lawlessness. Call it what you will...patent hoarder, patent troll, non-practicing entity, shell company, etc. It all means one thing: “we’re using your invention and we’re not going to stop or pay”. It’s a pure red herring by large invention thieves and their paid puppets to kill any inventor support system. Their goal is to legalize theft. The fact is, many of the large multinationals and their puppets who defame inventors in this way themselves make no products in the US or create any American jobs and it is their continued blatant theft which makes it impossible for the true creators to do so. To them the only patents that are legitimate are their own -if they have any. Meanwhile, the huge multinationals ship more and more US jobs overseas.

It’s about property rights. They should not only be for the rich and powerful -campaign contributors. Our founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity and the jobs the commercialization of those inventions bring. For 200 years the patent system has not only fueled the US economy, but the world’s. If we weaken the patent system, we force inventors underground like Stradivarius (anyone know how to make a Stradivarius violin?) and in turn weaken our economy and job creation. Worse yet, we destroy the American dream -the ability to prosper from our ingenuity for the benefit of our families and communities. To kill or weaken the patent system is to kill their futures. Show me a country with weak or ineffective property rights and I’ll show you a weak economy with high unemployment. If we cannot own the product of our minds or labors, what can we be said to truly own. Life and liberty are fundamentally tied to and in fact based on property rights. Our very lives are inseparably tied to our property.

Prior to the Supreme Court case eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the eBay decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don’t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back into the patent system with injunctions fully enforceable on all infringers by all patentees, large and small.

Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

Re: more dissembling by staff

Re: more dissembling by Masnick

Our founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution.

They were, in fact, very conflicted about including these things in the Constitution. Their fear was that these monopolies would eventually start getting interpreted as "property rights", which makes no sense and would distort the law in a way that would cause the overall loss of liberty.

Re: Re: more dissembling by Masnick

Ack, I forgot this bit: in my field (software engineering), patents are actively harmful, and the small you are, the more harm they do. It is quite literally impossible to write any nontrivial program without being accused of infringing on a patent, and it is equally impossible to know which patent(s) you will be accused of infringing before you go to market. Being accused of patent infringement is very often a death sentence for your product and/or your company.

you are proliferating harmful propaganda

I am an inventor. The "few exceptions" you dismiss in your article include hundreds of U.S. universities that have a positive cash flow from licensing the inventions of their professors and students. Even the cases you cite, Stanford and MIT, by themselves have raised billions of dollars that has funded more research and extremely positive educational endeavors such as student tuition for students who could not otherwise afford these prestigious institutions. Even for the universities that do not make money with their licensing programs, they get SOME return that allows them to fund more research than they otherwise would. Furthermore the process of developing the ideas to a point that qualifies for patent protection and then working to market the patents is a very positive learning experience for young inventors and is a critical part of the process to connect university research to real world solutions that help society. You likely have good intentions, but you are a victim of the massive spending on the "anti-troll" campaign waged by giant tech companies - principally Google, Cisco and Intel. These companies like to copy the successful inventions of small companies and universities without paying and they have done a very good job of stigmatizing any person or any entity, now including our wonderful universities, that owns a patent and wants to license it. Our patent system is the reason the U.S. has been the global technology leader for 200 years - it allows inventors to own and charge a royalty for their inventions and this incentivizes more inventions. Please stop drinking the anti-troll Kool-Aid and then passing it out to the public, it's bad for our universities, our students and our country.

Re: you are proliferating harmful propaganda

The "few exceptions" you dismiss in your article include hundreds of U.S. universities that have a positive cash flow from licensing the inventions of their professors and students.

This is simply not supported by the facts. The data suggest that about 10 to 20 universities have positive cashflow. The rest are negative.

Even for the universities that do not make money with their licensing programs, they get SOME return that allows them to fund more research than they otherwise would.

You may be an inventor, but you are bad at accounting. Losing money on tech transfer means less money to fund research. Not more.

Furthermore the process of developing the ideas to a point that qualifies for patent protection and then working to market the patents is a very positive learning experience for young inventors and is a critical part of the process to connect university research to real world solutions that help society.

No, it's not. Learning how to patent something is a wasted skill. Learning how to bring a product to market is valuable. Patents have nothing to do with that.

You likely have good intentions, but you are a victim of the massive spending on the "anti-troll" campaign waged by giant tech companies - principally Google, Cisco and Intel.

This is laughable. I am not a victim of any such campaign. Rather I have studied economics and read the research and came to my own conclusion. In fact, I've challenged the actions of all 3 companies who I feel have abused the patent system themselves.

I will also note that you ignore the copious research showing how patenting university research has slowed down the ability of universities to do groundbreaking research.

Wrong-

You have completely missed the point of Tech Transfer. What you classify as a massive failure is light years ahead of where we would be if not for the B-D Act. Your incredibly biased and under researched tripe you call a blog is worthy of lining the cage of some animal with GI problems. History is filled with people who claim certain ideas are failures only to have time prove them wrong...automobiles, the standardized shipping container, women's rights...you could make a list a mile long- Sadly though, you are intent upon casting dispersion's rather then looking for a positive path forward.